United States District Court, C.D. Illinois, Rock Island Division
UNITED STATES OF AMERICA, ex rel. BUD CONYERS, Plaintiffs,
KELLOGG, BROWN & ROOT, INC.; KELLOGG BROWN & ROOT SERVICES, INC.; KELLOGG BROWN & ROOT LLC; OVERSEAS ADMINISTRATION SERVICES, LTD; LA NOUVELLE GENERAL TRADING & CONTRACTING COMPANY; LA NOUVELLE GENERAL TRADING & CONTRACTING COMPANY WLL; LA NOUVELLE GENERAL TRADING & CONTRACTING CORP.; LA NOUVELLE GENERAL TRADING & CONSTRUCTION CORP.; FIRST KUWAITI TRADING COMPANY; FIRST KUWAITI TRADING AND CONTRACTING; FIRST KUWAITI GENERAL TRADING & CONTRACTING COMPANY; FIRST KUWAITI GENERAL TRADING & CONTRACTING COMPANY, WLL, and FIRST KUWAITI TRADING & CONTRACTING, WLL, Defendants.
SARA DARROW, District Judge.
Plaintiffs Bud Conyers and the United States are suing Kellogg, Brown, and Root and affiliated companies (collectively, "KBR") and two subcontractors in a qui tam action under the False Claims Act, 31 U.S.C. §§ 3729-3733. Conyers and the United States allege varied acts of fraud and misconduct in the execution of an Army contract to provide troop support in Iraq from 2003-2005. Before the Court is the Government's Motion to Strike Answer to Amended Complaint, ECF No. 68, First Kuwaiti Trading & Contracting WLL's ("First Kuwaiti") Motion to Dismiss for Lack of Jurisdiction, ECF No. 71, KBR's Motion to Compel Arbitration and to Dismiss or Stay, ECF No. 73, and First Kuwaiti's Motion to Supplement Motion to Dismiss for Lack of Jurisdiction, ECF No. 81. For the following reasons, the motion to strike, motion to dismiss, and motion to compel arbitration are GRANTED, and the motion to supplement is DENIED.
Bud Conyers initially sued as a private person on his own behalf and on the behalf of the United States Government, as provided by 31 U.S.C. § 3730(b)(1). Compl., ECF No. 1. He sued Halliburton Co., since dismissed from the litigation; Kellogg Brown & Root Inc.; and Kellogg Brown & Root Services Inc. The Government later intervened and filed its own Complaint, ECF No. 55, as permitted by 31 U.S.C. § 3731(c), naming as defendants several other Kellogg, Brown & Root corporate entities, two subcontractors, and various corporate entities associated with those subcontractors. The parties for whom attorneys have appeared are:
1. Relator Bud Conyers, a former employee of KBR.
2. The United States.
KBR Defendants ("KBR")
3. Kellogg Brown & Root, Inc. ("KBR, Inc."), a Delaware corporation headquartered in Texas.
4. Kellogg, Brown & Root Services ("KBRSI"), formerly a division of KBR, Inc.
5. Kellogg, Brown & Root LLC, headquartered in Texas, and successor to KBR, Inc.
6. Overseas Administrative Services, Ltd. ("OAS"), a payroll company through which some KBRSI personnel were retained.
Defendant First Kuwaiti
7. First Kuwaiti Trading & Contracting, WLL, a Kuwaiti corporation headquartered in Kuwait City.
First Kuwaiti states that all other First Kuwaiti entities identified in the Government's First Amended Complaint, ECF No. 55, are merely alternative names for First Kuwaiti Trading & Contracting, WLL. Mem. Supp. Mot. Dismiss 7 n.1. To date, service has not been executed on any of the La Nouvelle corporate entities named in the First Amended Complaint, nor has La Nouvelle appeared in court or otherwise waived service.
II. Allegations by Bud Conyers
On December 14, 2001, the U.S. Army Corp of Engineers awarded a 10-year contract to Brown and Root Services, a division of KBR, Inc., contract number DAAA09-02-D-0007, better known as LOGCAP III. LOGCAP III was an "umbrella contract" for the indefinite delivery of an indefinite quantity of logistical support services in military theaters, including transportation, facilities management, maintenance, dining, and living accommodations for troops.
Conyers served in the Army from 1987-1989 and then worked as a truck driver. In 2003, he went to work in Iraq as a truck driver and convoy commander for KBR. He worked for KBR's theater Transportation Mission, which provided transportation and support for United States forces in Iraq and Kuwait during the war.
In March 2003 the Army's 54th Quartermaster Company (the "54th") was deployed to Iraq as the only active Mortuary Affairs unit. The 54th helped recover human remains from battle and transport them to burial sites. The refrigerated trucks used to do this were colloquially known as "reefers." The reefers used to transport human remains were thus "morgue reefers."
On or about June 16, 2003, Conyers observed Walla Wynia, David Milk, and six other KBR drivers working on a reefer's engine. The truck had been broken for two weeks. After fixing the engine, the drivers went to check the contents of the trailer, and found fifteen Iraqi corpses in different stages of decomposition, rotting in the 120-degree heat. The bodies appeared to have been sitting there the whole time the truck was broken. The truck and trailer were subsequently sent back to a Public Warehousing Company facility, and its trailer, Trailer R-89, was reused for delivery of potable ice and other supplies to United States forces. KBR's Project Manager and Deputy Project Manager covered up the incident.
More than two months later, Convoy Commander Jeff Allen's August 31 mission log indicated that of 5, 000 pounds of ice loaded onto Trailer R-89, "approx. 1, 800 pounds" of it was "biocontaminated." The transportation and distribution of biocontaminated ice to United States forces contravened portions of the Army's Center for Health Promotion and Preventing Medicine's Technical Guide, and Halliburton's Code of Business Conduct.
Conyers also discovered that one of his supervisors, Willie Dawson, took kickbacks from the leasing companies that supplied reefers and other trucks under the LOGCAP III contract. Dawson was apparently not concerned about whether the trucks were functional or not. Of KBR's fleet of 200 reefers, only 50 ever worked, but KBR still submitted false claims to the Government for all 200, so that Dawson and others taking kickbacks could get paid. Fraudulent repair bills were also submitted for the reefers. Rob Nuble, a KBR employee, also took kickbacks from the supplier of flatbed trucks, and charged the Army for more trucks than were ever delivered. When Conyers complained about all of this, the local leasing company manager offered him a cut-"a kickback on all equipment that hits the ground, good or bad." Conyers refused and filed complaints with KBR's Internal Affairs Office; nothing happened.
When working in Kuwait, Conyers discovered that Serbian and Kosovar women were working as prostitutes for KBR managers and being paid as salaried LOGCAP III employees. Conyers reported this as well; nothing happened.
On October 24, 2003, Conyers told Jim Coin, KBR's Employee Relations manager for LOGCAP III, about an impropriety with another morgue reefer. Conyers was relieved of his LOGCAP III duties the following day, and KBR stopped paying him. When Conyers complained, he was told that this was what happened when you were not a "team player." KBR never reimbursed Conyers for the cost of a replacement leg prosthesis he was forced to buy when his own prosthetic leg broke while working in Iraq. KBR officially fired him on December 28, 2003.
Conyers now brings suit for retaliation under the False Claims Act, 31 U.S.C. § 3730(h), and breach of contract against KBR, Inc. and KBRSI.
III. Allegations by the United States
A. Terms and Conditions of LOGCAP III
LOGCAP III was a "cost reimbursable" contract, which obligated the Government to pay KBR all allowable costs incurred in the provision of services the Government requested, plus a one percent fee and a discretionary award fee of up to two percent. The Government's requests were made via Task Orders. Much of the work KBR did under LOGCAP III was performed by subcontractors. When KBR used subcontractors, it would voucher the government for its costs under the subcontracts, adding administrative fees and costs. Costs were deemed allowable by a Government official, who relied on representations made by KBR about the work done by the subcontractors.
The Government's acquisition of goods and services is governed by Title 48 of the United States Code, otherwise known as the Federal Acquisition Regulation ("FAR"). LOGCAP III incorporated FAR's cost principles. These principles required all of KBR's allowable costs to be incurred, reasonable, allocable to the contract, and not otherwise unallowable. FAR defines a reasonable cost as "one that "does not exceed that which would be incurred by a prudent person in the conduct of competitive business." Under the terms of LOGCAP III, it was KBR's duty to ensure price reasonableness in the award of subcontracts. The preferred methods of doing so under FAR were "adequate price competition" and the comparison of a subcontract price with other previous prices for similar contracts. Gov't's Am. Compl. ¶ 17. LOGCAP III also incorporated sections of FAR that correspond to the Anti-Kickback Act, 41 U.S.C. §§ 51-58.
During the time period in question, KBR also maintained a Government Procurement Procedures Manual; the Government relied on KBR to use the Manual in awarding subcontracts. In soliciting subcontracts, the Manual required KBR to use a Material Requisition to identify specific requirements, a defined statement of work, cost estimate, and other procurement planning documents. If a purchase exceeded $2, 500, the Manual required subcontract administrators to use a competitive bidding process. The Manual also stated that awarding a subcontract without competition ought to be the exception, rather than the rule. The practice of rewarding a contract without competition, called "sole sourcing, " was deemed appropriate only in the absence of any available competition for the contract. If the amount of the contract exceeded certain dollar values, a subcontract administrator was required to get the signature of a supervising KBR official. The Manual also required that the subcontract administrator verify that invoices from subcontractors were for the scope of work performed, resolve significant errors in the invoice, and forward all invoices to appropriate officials for payment. The subcontract administrator was required to retain a copy of the invoice and any attached documents.
B. Alleged Payment of Kickbacks by La Nouvelle and First Kuwaiti
Stephen Seamans, Jeff Mazon, and Anthony Martin were all subcontract administrators for KBR. On March 10, 2006, Seamans pleaded guilty to accepting $124, 000 in kickbacks from KBR subcontractor Tamimi Global Company, Ltd ("Tamimi"). In his plea, he also admitted to accepting $305, 000 from La Nouvelle for various kickback schemes. On March 24, 2009, Mazon pleaded guilty to making a false written statement in connection with a 2003 subcontract he awarded to La Nouvelle for fuel tankers. On July 13, 2007, Martin pleaded guilty to violating the Anti-Kickback Act in awarding a $4.67 million ...